The Triadvocate is a publication of Triad Strategies, LLC, a bipartisan lobbying, public affairs, strategic communications, grassroots advocacy, issue management consulting firm located in Harrisburg, Pennsylvania, with offices in Philadelphia and Pittsburgh

Tuesday, April 05, 2011

The Taxman Cometh

Despite Governor Tom Corbett’s firm pledge, there will be an extraction tax levied on Marcellus Shale drillers in Pennsylvania. The question has really become more of a “when,” not an “if.” Oh, it may not be this year, or in this budget debate. But the debate itself will come, and when it happens, the tax will pass.

Now, whether or not Corbett is compelled to sign it is another story for another day. Today, it is all about the General Assembly.

When an extraction tax bill passes, it will in all likelihood be a coalition of southeast Republicans and Democrats from across the state who brings it to fruition.

In the Philadelphia Inquirer this Sunday, there was an interesting piece on how the new drilling rules put forth by the Delaware River Basin Commission have essentially begun a new north/south civil war within Pennsylvania. Up in the shale-rich north, landowners of all stripe are awaiting the royalty checks and the jobs that the Marcellus play promises these mostly-poor counties. But along the Delaware watershed, where no Marcellus gas exists, they await an entirely different thing: a threat to their water, water that sustains millions of Pennsylvanians in its most populous area.

In fact, more than half of the state’s population lives outside the Marcellus Shale. To them, the promise of lower unemployment in Wayne County means very little. Basically, they all live downstream, either in the Delaware or Susquehanna Watersheds. They have very little to gain in this drama, other than the rising tide that may lift all boats.

And that is where today’s “impact fee” becomes tomorrow’s “extraction tax.”

We have all seen the polling that shows fairly widespread support for an extraction tax. The numbers speak for themselves. Instead, however, some top Republicans and even the governor have proposed a local impact fee, which would in theory get the industry to cough up some loot to pay for whatever damage and strain drilling puts on local and county governments, from infrastructure to emergency services. Many political onlookers thought this would mollify those looking for a pound of flesh from the drilling industry, and put the debate to bed. Didn’t happen; it only intensified it.

Last week, a powerful GOP Senator from southeastern Pennsylvania changed the debate entirely by teaming up with a conservative Democratic Senator to introduce a bipartisan extraction tax bill. Their plan would direct a third of the proceeds to local government impacts, a third to the Commonwealth Finance Authority for clean water initiatives and a third to the very popular Tom Ridge-era creation, Growing Greener.

The politics here are very clear. Voters in the southeastern part of the state want their water protected from gas drillers, and they don’t mind seeing them taxed to get that done. Those voters were also overwhelmingly supportive of Growing Greener when the bond issue that funded it was on the ballot. Therefore, supporting this extraction tax carries very little political risk for southeastern Republicans and almost no risk for Democrats.

In fact, one powerful GOP insider said that if an extraction tax hit the floor of the State Senate tomorrow, it would pass.

Knowing how difficult it is to get state budgets done without running Tax Code bills, it is hard to see how extraction tax opponents successfully avoid having this vote eventually. No amount of deft parliamentary maneuvering can stop it forever, in either chamber.

With organized labor and every other advocacy group under the sun rallying constantly for an extraction tax, the only real thing left is to see how quickly the state’s sportsmen and anglers weigh in (something we talked about way back in the good old days: February 2010), virtually guaranteeing its passage.

The only note of caution here is that it seems some folks are touting an extraction tax as the salvation to all of our state budget woes. It will fix our infrastructure, fund our schools, rescue our colleges and save social services. Well, it won’t; we know that much. It will help, but at the rates being discussed, it will make a very small dent in the grand scheme.

But have no doubt; this is a train that will arrive at Harrisburg’s station. Whether or not the governor is compelled to get on board is another matter.